Working Paper: CEPR ID: DP5103
Authors: Kristian Behrens; Andrea Lamorgese; Gianmarco I.P. Ottaviano; Takatoshi Tabuchi
Abstract: We develop a multi-country Dixit-Stiglitz model to investigate the impacts of: (i) changes in the international distribution of consumers' expenditure; (ii) decreasing tariffs; and (iii) improvements in transportation infrastructure. We show that, in general, decreasing tariff barriers do not allow for any clear predictions regarding changes in industry location and welfare, whereas this is possible with respect to improvements in transportation infrastructure. In particular, infrastructural improvements have spatially limited impacts when the transportation network is locally described by a tree. Any decrease in transport costs is Pareto welfare enhancing in this case.
Keywords: Home Market Effect; Imperfect Competition; International Integration; Multicountry Trade Models; Transportation Networks
JEL Codes: D58; F12; F17; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Improvements in transportation infrastructure (R42) | Welfare (I38) |
| Decrease in transport costs (R41) | Welfare (I38) |
| Decreasing tariff barriers (F13) | Industry location and Welfare (R32) |
| Decreasing tariff barriers (F13) | Firm location across countries (F23) |
| Improvements in transportation infrastructure (R42) | Changes in industry shares (L16) |
| Changes in tariffs (F19) | Broader implications across countries (F69) |